Friday, September 30, 2016

Today, the International Monetary Fund announced the launch of the new Special Drawing Right (SDR) valuation basket including the Chinese renminbi.

As approved by the Executive Board of the IMF on November 30, 2015, effective October 1, 2016, the RMB is determined to be a freely usable currency and will be included in the SDR basket as a fifth currency, along with the U.S. dollar, the euro, Japanese yen, and the British pound.

The Board also decided at that time that the weights of each currency would be 41.73 percent for the U.S. dollar, 30.93 percent for the Euro, 10.92 percent for the Chinese yuan, 8.33 percent for the Japanese yen, and 8.09 percent for the Pound sterling.

The climb was "an encouraging sign for the European Central Bank that its ultra-loose monetary policy is working."

Economic theory that holds consumers facing climbing prices is a good thing is positively bizarre, but it is a view that currently infects leadership at most central banks, with the possible exception of Elvira Nabiullina, Governor of the Bank of Russia.

In a new book called “The Curse of Cash”, Harvard economist Kenneth Rogoff advocates removing from circulation all cash with a denomination of greater than $10. In countries such as Sweden, Canada and Italy, the government is already beginning to discourage the use of cash. Almost everywhere in the world, a decreasing share of transactions are being done with cash. Are we moving towards a cashless society?

Surprisingly, despite the increasing use of credit cards, cash holdings are about 8% of GDP, which is actually a larger share of the US economy than a decade ago, indeed even larger than 90 years ago.

The amount of cash in circulation (paper currency and coins) is roughly $4500 for every man, women and child in America. It is believed that roughly ½ that total is held overseas, but even $2000/person would be a surprisingly large figure, far higher than people admit to in government surveys.

Ironically, it is this increasing popularity of cash holdings that helps explain why governments are so anxious to discourage the use of cash.

Economists study cash holdings with a model that looks at the costs and benefits of currency. Even back before 2007, people held fairly large quantities of cash, despite the fact that perfectly safe assets such as bank CDs and Treasury bills offered 3% to 5% interest. Of course cash earns no interest, and if you hold large quantities in safe deposit boxes, there’s even a small negative return on cash.

Therefore economists view the risk-free interest rate as the opportunity cost of holding cash, what you forego by not choosing a more traditional investment.

This helps to explain the recent surge in cash holdings. Since 2008, the interest rate on safe assets has been close to zero, and so there is no longer a substantial opportunity cost of holding cash. When the cost of something declines, people demand more of it. But what about the benefits of holding so much cash; why were cash holdings fairly large even back in 2007, when interest rates were well above zero?

One clue is to look at currency in circulation by denomination. The vast majority of currency (by value) is composed of $100 bills. And yet in ordinary transactions, people tend to use smaller bills, such as $1s or $20s. This is confirmed by the fact that small bills wear out pretty quickly, and need to be replaced often with newer versions at the Federal Reserve. In contrast, $100 bills wear out very slowly, suggesting they are mostly hoarded, and used only infrequently for transactions. So why is it that even back in 2007 most currency consisted of $100 bills being held for long periods, when better investments were available?

Cash has one big advantage over other investments — anonymity. There is evidence that cash is often used as a way of evading taxes. When people first hear about cash and the underground economy, they often picture gangster films with drug dealers swapping briefcases of cash. But the truth is often more mundane. Lots of cash is hoarded by people in otherwise legal businesses, who are simply trying to hide wealth from the IRS, or perhaps even their spouse. When interest rates fall to zero, cash becomes an even more appealing option.

The anonymity of cash is what makes it appealing to many people, but it’s also what makes it increasingly unpopular with governments. They see cash as a way of evading taxes, as well as facilitating drug dealing and other nefarious activities such as terrorism. Cash withdrawals of over $10,000 must now be reported to the government, and even a series of many smaller withdrawals of $3000 at a time must be reported by banks, if the pattern is “suspicious”. This is what sent former House Speaker Dennis Hastert to prison — withdrawing about $3000 at a time, from his own bank account.

Of course one problem with moving to a cashless society is the loss of privacy. If you share my libertarian leanings, you might worry about the NSA being able to find out about all of your purchases. Or a hacker might use embarrassing purchases to blackmail you. But regardless of how you feel about privacy, this seems to be the direction the world is moving.

It turns out that there is not one, but two reasons why governments are becoming increasingly anti-cash. The second reason is much harder for the average person to understand — the lure of negative interest rates...

[M]onetary policymakers [have begun] to think about a policy of negative interest on bank reserves... But one thing was standing in the way — cash [because customers would move thier funds from banks and hold them as cash if interest rates were significantly negative.]. The zero lower bound, which might in fact be closer to negative 1%, is the second reason why economists like Ken Rogoff have suggested moving away from cash. In a cashless economy, the Fed could push interest rates as far negative as they wish.

Thursday, September 29, 2016

You write in your document “Scoring the Trump Plan” that “[a]ccording to textbook theory, balanced trade among nations should be the long-term norm, and the chronic and massive trade deficits the US has sustained for over a decade simply should not exist.”

This claim is untrue. Nothing at all in economic theory says that it’s abnormal for a country to run trade deficits for over a decade, or even for over a century. Nothing in economic theory implies that years, decades, or even centuries of unbroken annual trade deficits are evidence of ‘unfair’ trade practices by foreigners or of self-destructive economic policies at home.

If investment opportunities available in the United States this year are especially attractive relative to opportunities elsewhere, the U.S. will run a trade deficit this year as global investors use some of their dollars, not to buy American exports but, instead, to invest in America. If next year the U.S. economy again offers especially attractive investment opportunities, America will run a trade deficit again next year. Ditto for two years from now if the relative attractiveness of American investment opportunities continues for that year. For an innovation-filled economy, such as that of the U.S., in a world in which the size of the capital stock can grow, there is no natural limit to the number of attractive investment opportunities that arise each year. Nor is there a natural limit to the number of consecutive years that a country can, or will, continue to remain a disproportionately attractive destination for investment funds.

The fact that you do not understand this elementary point – along with the fact that you utterly fail also to understand that investments in the U.S. made by foreigners are just as likely to create jobs in the U.S. as are investments made in the U.S. by Americans – is proof positive that you need to consult very different economic textbooks.

Do you think it's coincidence that OPEC announced this the same day Congress overode Obama's veto on the 9/11 lawsuit bill?

After reports a couple of day ago that a deal was "elusive," at a meeting in Algiers yesterday, OPEC agrees to cut oil production for the first time since 2008. Crude oil prices jump from $40 to $48/barrel.

The elite continue to launch propaganda that the pure as newly fallen snow Federal Reserve couldn't possibly be manipulating interest rates for political reasons.

After an embarrassing establishment CNN propaganda piece claiming that Fed low interest rate policy could never be political, up to the plate steps Patrick Chovanec, chief strategist at Silvercrest Asset Management, an Adjunct Professor at the School of International and Public Affairs, Columbia University and most notably a policy aide to Republican strategist and Trump-hater William Kristol at Project for the Republican Future.

Chovanec writes in Foreign Policy, published by The FP Group,a division of Graham Holdings Company (formerly The Washington Post Company):

[T]he Fed is keeping interest rates low because the U.S. economy — faced with a weak global economy — isn’t as strong as we might expect or desire and is walking on fragile ground.

Which he uses as a justification to claim that the Fed is not political.

But the Fed in its most recent statement says nothing close to what Chovanec is claiming is the reason the Fed hasn't hike rates. From the FOMC statement:

Information received since the Federal Open Market Committee met in July indicates that the labor market has continued to strengthen and growth of economic activity has picked up from the modest pace seen in the first half of this year. Although the unemployment rate is little changed in recent months, job gains have been solid, on average...

In public statements, Fed vice-chairman Stanley Fischer and other Fed members have stated that they believe the U.S. economy is at or near full employment.

And there is nowhere near the concern by the Fed about weak global economies that Chovanec claims in his piece.

All and all, the piece is pure propaganda from an establishment operative and nothing more.

Billionaire vulture investor, Wilbur Ross, who is considered a candidate for the Treasury Secretary position in a Donald Trump Administration, has released along with the free trade-hating economist Peter Navarro an analysis of Trump's economic plan.

When evaluated as a single integrated whole, the Trump plan is revenue neutral...

Got that? Tax revenue is not going to go down in a Trump administration. The points of taxation will just be shifted around. To be sure, the Trump plan has some typical crazed political economic growth projections that suggest that tax rates will be lower because of higher profits and worker income, but don't count on it. Count on the revenue neutral tax plan, that is, shifting taxes around but overall the same tax grab by the government as now. In fact, I wouldn't be surprised if the total tax burden climbed during a Trump administration.

The House voted Wednesday night to extend government funding until Dec. 9, avoiding a government shutdown this weekend by sending the measure to President Obama. The Senate passed the bill earlier in the day, and Congress is now set to recess until after the Nov. 8 election.

OPEC has reached an understanding at a meeting in Algiers to cut crude-oil-production cut but they will wait until November to set the exact level of cuts.

UPDATE 2

According to The Wall Street Journal, a consensus was reached after a 4 1/2 hour meeting. OPEC, the 14-nation cartel that controls over a third of world oil output, has been producing at record levels.

A person familiar with the matter said the cartel was considering cutting production to between 32.5 million barrels a day and 33 million barrels a day—down from August levels of 33.2 million barrels a day.

Exactly how the production cuts would be achieved is unclear. The person said a committee would be formed to study how to carry out the cuts and then report to the cartel at its next meeting on Nov. 30 in Vienna.

UPDATE 3

“Today, an exceptional decision was made at OPEC,” Iran’s oil minister, Bijan Zanganeh, told reporters after the meeting, according to Iranian state media service Shana.

Just listen to the below howler of a propaganda piece from Christine Romans at CNN after Trump, during Monday's debate, accused Janet Yellen of being political.

This Fed "expert" majored in French, journalism and mass communication at Iowa State University.

Her claim is that the Fed isn't influenced by politics. I'm willing to bet she got the talking points for this piece directly from a Fed PR agent because, apparently, they didn't teach Fed history in her French classes at Iowa State. Although she claims the Fed has always been as pure as the virgin snow, she has missed a few things

The fact that President Nixon pressured [Federal Resrve chairman] Arthur Burns to run an expansionary monetary policy in the run-up to the 1972 election is well-known (for example, Tufte, 1978, pp. 45–50). As another example, John Ehrlichman (1982, pp. 248 – 49) describes a meeting between Nixon and Burns on October 23, 1969, just after Burns’s nomination to the Fed had been announced.

Kevin Phillips, a political and economic commentator for more than three decades and onetime Nixon strategist, reports that President Richard Nixon asked his Federal Reserve chairman, Arthur Burns, to concoct a new inflation number that would be split off from traditional headline CPI, dubbed “core” inflation—and thus make inflation look less threatening.

Writes Phillips:

Richard Nixon, besides continuing the unified budget, developed his own taste for statistical improvement. He proposed albeit unsuccessfully—that the Labor Department, which prepared both seasonally adjusted and non-adjusted unemployment numbers, should just publish whichever number was lower. In a more consequential move, he asked his second Federal Reserve chairman, Arthur Burns,to develop what became an ultimately famous division between "core" inflation and headline inflation. It the Consumer Price Index was calculated by tracking a bundle of prices, so-called core inflation would simply exclude, because of "volatility," categories that happened to he troublesome: at that time, food and energy. Core inflation could he spotlighted when the headline number was embarrassing, as it was in 1973 and 1974. (The economic commentator Barry Ritholtz has joked that core inflation is better called "inflation ex-inflation"—i.e., inflation after the inflation has been excluded.)

In his memoir, Arthur Burns tells us what he once told President Nixon:

I informed the President as follows : (1) that his friendship was one of the three that has counted most in my life and that I wanted to keep it if I possibly could; (2) that I took the present post [Fed chairman] to repay the debt of an immigrant boy to a nation that had given him the opportunity to develop and use his brain constructively; (3) that there was never the slightest conflict between my doing what was right for the economy and my doing what served the political interests of RN.

Janet Yellen was forced to fend off new questions about the Federal Reserve’s political independence on Tuesday as a Republican lawmaker asked her if one of the central bank’s governors was too close to Hillary Clinton’s campaign.

The Fed chair was challenged by Scott Garrett, a Republican from New Jersey, over donations that Fed governor Lael Brainard has made to the Clinton campaign and over unconfirmed media reports that Ms Brainard is a contender for a senior job in a potential Clinton administration.

The exchanges came only two days after Donald Trump, the Republican presidential candidate, claimed in his debate with Mrs Clinton that the Fed has been keeping short-term interest rates low to help the Obama administration and was sustaining a “big, fat, ugly bubble” in the stock market....

After a false start and cross talk between lawmakers seeking to end Mr Garrett’s questioning, the Fed chair said: “I would have to consult my counsel. I’m not aware that that’s a conflict, but I would …” Then she was herself cut off by the committee chair.

Shortly beforehand Ms Yellen said she had “absolutely no awareness” of Ms Brainard being in touch with the Clinton camp about a job.

Pressed on $2,700 in donations that Ms Brainard has made to Mrs Clinton’s campaign, the maximum permitted for individual contributions in a primary election cycle, Ms Yellen noted that the Hatch Act does not prohibit political contributions by Fed governors...

Mr Garrett told the Fed chair: “As the saying goes, perception is reality. Whether you like it or not, the public increasingly believes that Fed independence is nothing more than a myth. The Fed has an unacceptable cosy relationship with the Obama administration and with higher ups in the Democratic party.”

Asked if she had ever asked Ms Brainard to recuse herself from monetary policymaking due to her “close involvement” with the campaign, Ms Yellen said: “She’s acting in a way that is permitted by the rules we are subject to. Each one of us has to decide for ourselves.”

Carmen Mendoza came to New York to visit her daughter Anabella -- and also to buy toilet paper, soap, toothpaste, beans, corn flour, tuna fish, mayonnaise and aspirin.

Mendoza, 66, can't find these basic goods in her home country: Venezuela....

About half a million Venezuelans visited the United States last year. Increasingly, Venezuelans living in the U.S. say their friends and family who can afford it are coming to America to buy basics.

"It's just a testament to how badly the country is being managed," says Beatriz Ramos, a Venezuelan tech entrepreneur, who lives in New York. Ramos has hosted six friends from Venezuela this year: "It's been steadily getting worse and worse and worse."

You have to look hard but you can occasionally find sound comments from Paul Krugman, especially when truth is the best way for him to shill for Hillary Clinton.After the debate, he wrote this in The New York Times, which is correct:

[I]t seems to be conventional wisdom that Trump did well in the first 15 minutes. And I guess he did if you are impressed by someone talking loudly and confidently about a subject he really doesn’t understand. But really: Trump on trade was ignorance all the way.

There were specifics: China is “devaluing” (not so — it was holding down the yuan five years ago, but these days it’s intervening to keep the yuan up, not down.) There was this, on Mexico:

Let me give you the example of Mexico. They have a VAT tax. We’re on a different system. When we sell into Mexico, there’s a tax. When they sell in — automatic, 16 percent, approximately. When they sell into us, there’s no tax. It’s a defective agreement. It’s been defective for a long time, many years, but the politicians haven’t done anything about it.

Gah. A VAT is basically a sales tax. It is levied on both domestic and imported goods, so that it doesn’t protect against imports — which is why it’s allowed under international trade rules, and not considered a protectionist trade policy. I get that Trump is not an economist — hoo boy, is he not an economist — but this is one of his signature issues, so you might have expected him to learn a few facts.

I’ve been writing about Donald Trump’s claim that Mexico’s value-added tax is an unfair trade policy, which is just really bad economics. Here’s Joel Slemrod explaining that a VAT has the same effects as a sales tax. Now, nobody thinks that sales taxes are an unfair trade practice. New York has fairly high sales taxes; Delaware has no such tax. Does anyone think that this gives New York an unfair advantage in interstate competition?

But it turns out that Trump wasn’t saying ignorant things off the top of his head: he was saying ignorant things fed to him by his incompetent economic advisers. Here’s the campaign white paper on economics. The VAT discussion is on pages 12-13 — and it’s utterly uninformed.

And it’s not the worst thing: there’s lots of terrible stuff in the white paper, at every level.

Should we be reassured that Trump wasn’t actually winging it here, just taking really bad advice? Not at all. This says that if he somehow becomes president, and decides to take the job seriously, it won’t help — because his judgment in advisers, his notion of who constitutes an expert, is as bad as his judgment on the fly.

Which is not to say that Hillary's economic thinking is any sounder, only that KrugmanKrugperson won't tell you that.

The history of slavery in the United States justifies reparations for African Americans, argues a recent report by a U.N.-affiliated group based in Geneva, reportsThe Washington Post.

This conclusion was part of a study by the United Nations' Working Group of Experts on People of African Descent, a body that reports to the international organization's High Commissioner on Human Rights.

"In particular, the legacy of colonial history, enslavement, racial subordination and segregation, racial terrorism and racial inequality in the United States remains a serious challenge, as there has been no real commitment to reparations and to truth and reconciliation for people of African descent," the report stated. "Contemporary police killings and the trauma that they create are reminiscent of the past racial terror of lynching."

Since we are apparently playing this game of back to the future based on classes where many individual members of the class that is demanded reparations from, namely non-African Americans, had nothing do with slavery etc. (zero), perhaps we should look at the most evil class on the planet, government employees. More people have been killed, been tortured, and otherwise ruined, at the hands of government employees than by any other class, See Death By Government.

Since the United Nation is an organization of governments, those working for it should be considered high-powered government employees. As a first step, I urge therefore the members of the United Nations' Working Group of Experts, based on their back to the future "logic," to divest themselves of all their material wealth by distributing is to us in the non-government class, who have suffered for centuries at the hands of government employees.

This would be a good start if these experts really believe in their argument.

Tuesday, September 27, 2016

While neither Donald Trump or Hillary Clinton are going to get awards for fundamental economic understanding based upon the comments made during the presidential debate last night, the award for most brain-crashing economic comment has to go to Hillary.

She said this at one point:

I also want to see more companies do profit-sharing. If you help create the profits, you should be able to share in them, not just the executives at the top.

It's really hard to know if she really believes this, it might have been said just to shore up support with Bernie's socialists, but Trump acted like a beached whale after the comment was made, when it was juicy plankton that Hillary left in the open sea for him.

This notion that there needs to be "more" sharing of profit comes right out of Karl Marx, by which I mean the comments signals a remarkable failure to understand the nature of

Just who the hell is Hillary to decide how much profit sharing should be going on between individual firms and workers, if any?

Many, many people just want a solid steady paycheck not based on the whims of profits. Taking the idea one step further, as the philosopher David Gordon said to me while discussing Hillary's comment, "Does this mean workers will have to participate in losses also?"

She, of course, meant no such loss participation. Share in profits let the capitalists take the hit on any losses is her game plan. Does she really think this is going to encourage capitalists to take more risks and hire more labor? Hillary definitely has some wires crossed with this kind of thinking, no expensive Obamacare paid for cranial CAT scan needed to detect this.

The comment from Hillary should have brought on more discussion from the talking heads post-debate then if Hillary had experienced a combo coughing fit and the shakes on stage after receiving a Lester Holt softball question. Yet, no such discussion occurred. Not one of them had an antenna that could detect Marxian mumbo jumbo from a United States presidential candidate. Is there any wonder why the country is in the mess it is in?

If a good portion of the populace understood the fundamentals of economics and the nature of freedom, I'm convinced that rather than being on a presidential debate stage, Hillary would be back in Arkansas with a job as a second rate bikini shaver in a high class joint.

Former New York City Mayor Michael Bloomberg is helping to bankroll a television-commercial campaign in favor of proposed soda taxes in Oakland and San Francisco, known as Measure HH and Proposition V, respectively, both of which will appear on the November ballot. You can’t miss the commercial if you live in the Bay Area, as it seems to air a thousand times a day on local TV stations...

The Oakland and San Francisco soda taxes would charge distributors an additional one cent per ounce of soda they sell (or $2.88 per case). The tax would also apply to other sugar-sweetened drinks.

As McQuillan notes, this could very easily end up as a tax on consumers despite the tax being applied at the distributor level:

There’s an important difference between the “imposition of a tax,” on the one hand, and the “incidence of a tax,” on the other hand. Imposition is where the tax is technically levied. Incidence refers to who really pays the tax (the tax burden), which is one of the most important questions regarding any tax. Every microeconomics principles textbook covers this topic.

It really depends on the cost structures of the firms involved and the elasticity of demand for the product at the consumer level. Bloomberg knows this since the Bloomberg ad makes the implication, which is likely accurate, that the tax will impact consumers directly since it supposedly is going to fight childhood obesity and type two diabetes by raising the cost of soda at the consumer level.

In other words, as McQuillan correctly concludes:

The soda tax is also akin to telling your child this: “Your classmate Lawrence is not drinking what we think he should. So it’s ok to steal money from Lawrence and all his classmates until Lawrence stops drinking bad things.” Hopefully no parent would tell their child this. Neither should this immoral and flawed logic be the basis of public policy. But it’s the logic behind Measure HH and Prop V. The lesson being taught by the pro-tax side is “It’s ok to steal, as long as you think you’re doing right by it.” Taxation is always theft; “legal” theft, but theft nevertheless. It’s taking money by force from others.

All world history … presents … a contest … between the economic and the political means. …The state is an organization of the political means … forced by a victorious group of men on a defeated group, with the sole purpose of regulating the dominion of the victorious group over the vanquished. — Franz Oppenheimer

Hillary and Trump are not the only people waging Fall Campaigns.

If you watched the presidential debate Monday evening, you may despair that any libertarian perspective was entirely missing. And you justifiably fear that the outcome of November’s election will not be pretty, regardless of who prevails.

If you were waiting for Trump or Hillary to talk about significantly limiting state power, respecting state and local decision-making, restoring civil liberties, rolling back the regulatory leviathan, or getting out of the Middle East altogether, you’re still waiting. Because if political candidates excel at anything, it is hubris. Their pretense of knowledge gives way to the great mass delusion of our time, one shared by far too many Americans: that government is somehow omniscient.

That’s why the Mises Institute needs your support: to make the case against the dominant, i.e., political, narrative of our time. Our Fall Campaign, held all this week in honor of Mises’s September 29th birthday, is a chance for you to vote against politics and for liberty. It is your chance to vote for “None of the above.” And even $5 every month can make a difference.

It’s tempting to dismiss Hillary simply as deeply unlikeable and amoral. But her toxic brand of Wall Street cronyism, war cheerleading, and leftist social engineering represents the core of modern politics. Her absolute goal is to silence, even criminalize, voices that oppose the march of progressivism and globalism.

It’s also easy, and facile, for libertarians to dismiss Trump. As a populist he is ideologically unmoored, and prepared to use state power at will. While he almost single-handedly exposed Conservatism, Inc. as a fraudulent gravy train that fails to conserve anything, he is temperamentally wired for action, not forbearance — a dangerous quality in a politician.

Certainly we — as liberty-minded individuals — should have learned our lesson by now. Divisiveness is not a byproduct of politics, it’s a feature. Politics is designed to create hatred and unrest, as a prelude to justifying more and more state power over our lives.

After all, politics is war by other means. And war claims victims. War has winners and losers. Most of all, war has profiteers: namely the political class and its many clients, both in government and the nominally private sector.

Power is at the heart of all political action, no matter how many platitudes are offered by the candidates. And make no mistake: political power is personal power, a short cut to wealth and status for untold numbers of mediocrities at all levels of government.

There’s another way: real liberalism, the kind Ludwig von Mises exalted. Real liberalism boldly cedes power to the individual, to families, and to civil society. Real liberalism eschews force and state coercion. It is the antidote to power, the only moral and practical choice between what Oppenheimer termed “political means” and “economic means.”

Mises stood always for the latter. Born in 1881, he was raised in the magnificent culture that Donald Rumsfeld derided as “Old Europe.” But he saw the conflagration caused by Soviet Communism, Nazism, and two World Wars — all collectivist endeavors. And while Mises certainly believed the state had a limited role to play in protecting property and individual rights, one doubts whether he would see any redeeming value in today’s technocratic superstates. Surely he would find little to celebrate in the current political landscape.

The Mises Institute exists to carry forward the important work of Mises and other Austrian economists, but also to advance their vision of political liberty. And we need your help. While millions of dollars pour into political campaigns and DC think tanks, the Mises Institute is supported entirely by donors like you. More than 5 million people are on pace to visit mises.org in 2016. If each of them gave just $1, our fundraising would be simple! Won’t you please make your most generous donation to our Fall Campaign today?

If we embrace politics, willingly or reluctantly, we must accept the unholy consolidation of power in the hands of a few — the worst few. Oligarchy is not some anomaly, but rather the predictable result of our willingness to devolve power to Washington DC.

Politics and government won’t go away anytime soon. But the system is breaking down, and that affords us an opportunity to make the case for a better world: one organized more around markets and civil society, and less around the state.

I have a new article on the Future of Freedom Foundation (FFF) website on, “Economic Ideas: Plato, Aristotle, and the Ancient Greeks, Part 2.”

When we turn to Aristotle, we find little of Plato’s advocacy of collectivism. Indeed, Aristotle rejects collective ownership of land, saying that it is inconsistent with human nature, and breaks the close bond between work and reward that comes with private property, out of which comes incentives and a healthy work ethic.

Aristotle also considered successful use of private property and the wealth-creation that may come with it as a source and basis of human generosity and benevolence desirable in a good society. But nonetheless, like his teacher, Plato, he considers that the interests and purposes of the State come before that of the individual, since man is a “political animal.”

Aristotle attempted to grapple with issues related to economics, but drew peculiar and misdirected distinctions between “natural” and “unnatural” trade, commerce and exchange, which led him to heavily criticize professional merchants, traders, and middlemen as corrupting members of society. And he fails to understand or offer solutions to explain the basis upon which goods are exchanged for each other, a faulty analysis that leads him to condemn the taking of interest on loans.

Nonetheless, Aristotle represents an important step in the establishment of a sound appreciation of property, production and personal incentives, and at least tries to deal with the nature of a market system of human association.

In a recent Labor Day speech to union workers in Illinois, Hillary Clinton declared that if she is elected president of the United States, she would make sure that “some employers go to jail for wage theft and all the other abuses they engage in.” Her incendiary comments were obvious “red meat” for the audience, but it also helped to clarify her own economic views and how she would govern if elected.

Monday, September 26, 2016

Back in the good old days, banks use to regularly send out credit cards to their good customers hoping they would use them. The customers didn't ask for the cards, they just arrived in the mail. Sometimes even from banks you had never done business with. You could throw them away if you wanted to. These weren't called "fake cards," they were real and the banks took on the risks of issuing the cards.

Somewhere along the line, a regulator poked his nose into this business and the sending out of unsolicited credit cards was ordered stopped.

The banks complied.

Now, the banks have to go through the much more expensive process of requiring its employees to solicit from their customers authorizations for these credit cards. This, of course, is a much more expensive process and likely contributes to some degree to current sky-high credit card interest rates.

The banks, of course, really didn't want to have to put this expensive middle-person in the process. It was the regulations. They would have preferred to just pass the damn cards out. It was much more efficient and a lot cheaper.

When a bankster middle-person was put in the middle of the entire process, pressure was put on the middle-person to sign up as many accounts as possible. The bank didn't really care how much slam dunk approval the customer gave---the bank would have sent these without any approval if it wasn't for the regulations.

This was an aggressive workaround of a government regulation that is about it. It is really a stretch to call these "fake accounts." Wells Fargo was just doing what it would have been able to do in a free market---and had done decades earlier.

Elizabeth Warren is much more of a fake Indian than these are "fake" accounts.

And yet when the pressure was put on Wells Fargo by Warren and other circling government yahoos, Wells Fargo fired the 5,300 employees that used the workaround that was surely understood by many in senior management.

Not for one second did any Wells Fargo senior management stand up to the government. I watched part of the testimony of Wells Fargo Chairman and CEO John Stumpf when Warren questioned him during a Senate Banking Committee hearing, he acted like a total wimp.

And Warren yapped on about "fake accounts" that will do nothing but make it more difficult for 5,300 fired Wells Farge employees to find another job after doing what I am sure appeared to them standard operating procedure of the bank. But all the world knows is that these 5,300 were opening "fake" accounts. Hey, Warren lets see your blood genealogy test results before you start calling anything fake.

Warren and Stumpf deserve each other. They are both creeps seeking to protect their own career regardless of how many decent people, in this case 5,300, they hurt.

I wish the best of luck to the 5,300 employees who were fired. May their next jobs be at firms that will stand by their employees and not throw them out at the first sign of creeping regulators.

The California non-profit corporation Internet Corporation for Assigned Names and Numbers (ICANN) has contracted with the Department of Commerce to manage Internet Assigned Numbers Authority (IANA) functions, which include Domain Name System (DNS) root coordination, IP address responsibilities, and other functions. The transfer of these functions is scheduled to transition to ICANN on October 1, 2016 away from the Department of Commerce and the United States.

IANA functions something like a telephone directory. ICANN’s jobs, vis IANA, is to maintain the “root zone file” – the address book for top-level domains, like .com, .gov, and so on. When the .com registry needs another server, it requests that ICANN assign a new Internet Protocol (IP) address for that server. ICANN ensures that all the Internet standards are met and sends it on to the NTIA, which checks and authorizes the work, and then asks another Internet company, Verisign, to add the IP address to the root zone file.

The Commerce Department has pretty much kept hands off and conducted its IANA function as that of a bookkeeper: address requested, address logged. The fear is that things could change with ICANN in full control of IANA after October 1.

For example, suppose at some future date the ICANN authorities decide some web address is not politically correct and they refuse to list it, so much for that web address. That's serious stuff. That could lead to serious censorship.

No one is expecting such censorship to start immediately, though, there are ongoing battles over top-level domains such as .gay, .islam and .amazon already.

How all this will turn out no one really knows. ICANN is a global, political, bureaucracy that alone should be a long-term warning signal.

It has four advisory committees (made up of governments and international treaty organizations, the operators of the 13 root servers at the heart of the Internet, cyber-security experts, and average Internet users). The decisions are made by a 21-member board (15 members can actually vote).

Further, ICANN’s government advisory committee has 172 countries represented, but any one country can veto a recommendation to the board.

No doubt at some point in the future Hayek's dictum about politics, that the worst get on top, suggests that, eventually, someone will figure out how to game the system, for purposes yet unknown.

Whether the Commerce Department is less vulnerable to eventual manipulation and censorship than a global bureaucracy is an open question. One wonders why governments need to be involved with this at all. Telephone networks, numbers and directories developed, especially in the early days, without government regulation.

Ironically, one of the most crucial skills that drove the entrepreneur's success didn't come from Harvard, where he spent eight years and collected three degrees — a BA, JD, and MBA.

Shortly after starting Boston Beer, Koch realized that in order to get his beer, Samuel Adams, to market, he first needed to learn how to sell it — and that's something the Harvard Business School alum said the Ivy never taught him.

While the university has "dozens of courses on marketing," he explained, it had none on selling, so Koch headed to the HBS bookstore and bought the one relevant book he could find: "How to Master the Art of Selling" by Tom Hopkins.

"It had this cheesy guy in a polyester suit, grinning, on the cover," he recalled. "There were some sleazy parts, but the gist of it was quite good. He actually went on to write 'Selling for Dummies.' It was very worthwhile."

The self-taught salesman realized that selling isn't the "ignoble activity" we've been culturally trained to think of it as. "I learned, against all my expectations, that done right, it is very noble," he said. "You are helping the customer achieve their objectives, so you have to learn to listen and empathize."

Additionally, figuring out how to sell Samuel Adams "turned out to be the most intellectually challenging thing that I had encountered in business," Koch said.

"You've got 30 seconds when you walk into the bar — and you have to figure out who their customers are, what their economics look like, how they make money, who's the decision maker, what's their thought process, what's their communication style … so you are intellectually challenged at a very high level."

The Wells Fargo bank account scandal took center stage in the news last week and in all likelihood will continue to make headlines for many weeks to come. What Wells Fargo employees did in opening bank accounts without customers' authorization was obviously wrong, but in true Washington fashion the scandal is being used to deflect attention away from larger, more enduring, and more important scandals.

What Wells Fargo employees who opened these accounts engaged in was nothing more than fraud and theft, and they should be punished accordingly. But how much larger is the fraud perpetrated by the Federal Reserve System and why does the Fed continue to go unpunished? For over 100 years the Federal Reserve System has been devaluing the dollar, siphoning money from the wallets of savers into the pockets of debtors. Where is the outrage? Where are the hearings? Why isn’t Congress up in arms about the Fed’s malfeasance? It reminds me of the story of the pirate confronting Alexander the Great. When accused by Alexander of piracy, he replies “Because I do it with a small boat, I am called a pirate and a thief. You, with a great navy, molest the world and are called an emperor.”

Over two thousand years later, not much has changed. Wells Fargo will face more scrutiny and perhaps more punishment. There will undoubtedly be more calls for stricter regulation, notwithstanding the fact that regulators failed to detect this fraud, just as they have failed to detect every fraud and financial crisis in history. And who will suffer? Why, the average account-holder of course.

Any penalties assessed against Wells Fargo will be made up by increasing fees on account-holders. Clawbacks of bonuses, if they occur, will likely face resistance from the beneficiaries of those bonuses, leading to protracted and costly lawsuits. Even if the Wells Fargo CEO and top executives of Wells Fargo step down, the culture at Wells Fargo is unlikely to change anytime soon. As one of the largest banks in the world, Wells Fargo knows that it is not only too big to fail, but also too big to prosecute. At the end of the day, no matter how much public posturing there is, Wells Fargo and the regulators will remain best buddies. And those regulators who failed to catch this fraud will be rewarded with more power and larger budgets, courtesy of the US taxpayer.

Through all of this, the Federal Reserve will continue its policy of low interest rates and easy money. Retirees who hoped to be able to live off the interest on their investments will find themselves squeezed by continued low interest rates. Those living on fixed incomes will see their monthly checks buying less and less as the prices of food staples continue to rise. The fat cats on Wall Street will continue to have access to cheap and easy money while those on Main Street will face a constantly declining quality of life.

It is well past time for the Federal Reserve to face the same music as Wells Fargo and the bad actors on Wall Street. It is, after all, the Federal Reserve's creation of money out of thin air that enables all of this fraudulent behavior in the first place, so why should the Fed remain untouchable? Let's hope that someday Congress wakes up, hauls the Federal Reserve in for questioning, and puts as much pressure on the Fed as it does on private sector fraudsters.The above originally appeared at the Ron Paul Institute for Peace and Prosperity.

A pair of dime-store panties Andy Warhol bought in 1982 is now worth six figures, according to “Antiques Roadshow.”

Warhol drew an image of Mickey Mouse on the frilly drawers — purchased at the old Lamston’s department store in Union Square — and gave them to his friend Titti Wachtmeister.

Titti died in 1992, but her sister Anna Wachtmeister took the undies to a recent taping of the TV show, and explained why Warhol was beholden to her sister: Titti and Richard and Robert Dupont introduced Warhol to liquor importer Michel Roux — leading to the artist’s Absolut Vodka campaign.

Sunday, September 25, 2016

This year’s presidential campaign has confirmed at least one fact of modern American politics: Democrats have lost their claim on populist politics: Donald Trump has energized millions of working people fed up with political and economic elites pushing bad trade agreements for Wall Street’s benefit. Meanwhile, Hillary Clinton has been forced, awkwardly, to convince voters she will put the interests of everyday Americans ahead of the big global banks who have supplied the Clinton machine tens of millions of dollars over the years.

During the Democratic primary contest, Bernie Sanders’s most effective attack on Hillary Clinton highlighted her close association with Wall Street banks. Sanders effectively made the connection between these banks and their support of bad trade deals for American workers. In the general election contest between Hillary Clinton and Donald Trump, the opportunity for contrast is still there.

Unlike community banks, which serve local communities, know their economies and are committed to their neighbors, the “too-big-to-fail” (TBTF) banks don’t know their customers, serve themselves and could care less about their neighbors. When the great financial crisis came, TBTF banks were largely responsible. The American people rightly wanted justice. But it was time for payback, and the TBTF banks used their capture of the Democrat party for years of financial support to extort protection. Nobody went to jail, and Hillary and her pals have since then helped to make sure that no real harm comes the TBTF banks. Amazingly, since the crisis, the TBTF banks have only grown bigger.

Six years since President Obama signed the Dodd Frank Act, the banks his Administration regarded as too big are now 30% bigger than they were in 2010, and 80% bigger than before the banking crisis of 2008. The six largest U.S. financial institutions now have assets of some $10 trillion, amounting to almost 60% of our GDP and controlling almost 50% of total deposits. In contrast, community banks have been hit very hard. There are 1,524 fewer banks with assets under $1 billion than before the financial crisis. Small, community-focused lenders are being squeezed by the TBTF banks with whom Hillary Clinton has been so closely associated.

In a Staff Concluding Statement of the 2016 Article IV Mission just released on Greece, the report states (my emphasis):

Recurrent political crises and confidence shocks associated with the inability to sustain the reform effort resulted in a high cost for society, with output having declined by 25 percent and still stagnating, and unemployment and poverty rates remaining much higher than before the crisis. Looking forward, growth prospects remain weak and subject to high downside risks, and unemployment is expected to stay in the double digits until the middle of the century.

Does the IMF not understand supply and demand? Markets clear, including labor markets, unless there are price controls (specifically minimum wage laws in the case of labor) or other regulations which prevent hiring.

Remove the minimum wage laws and other regulations which prevent hiring and the unemployment crisis will disappear immediately.

The fact that the IMF staff paper simply assumes double-digit unemployment in Greece until the middle of the century provides insight about the idiotic technocrats operating at these global bankster institutions.

U.S. Treasury Secretary Jacob Lew will travel to Buenos Aires, Argentina; Brasília, Brazil; Bogotá, Colombia; and Mexico City, Mexico from September 26 through September 29.

In each country, according to the Treasury Department, "Secretary Lew will meet with official counterparts and private sector leaders to discuss policies to promote shared economic growth and stability, to combat money laundering, and to advance regional and global cooperation."-RW

TO JACK SCOTT, VANCOUVER SUNOctober 1, 1958 57 Perry Street New York CitySir,I got a hell of a kick reading the piece Time magazine did this week on The Sun. In addition to wishing you the best of luck, I'd also like to offer my services.Since I haven't seen a copy of the "new" Sun yet, I'll have to make this a tentative offer. I stepped into a dung-hole the last time I took a job with a paper I didn't know anything about (see enclosed clippings) and I'm not quite ready to go charging up another blind alley.By the time you get this letter, I'll have gotten hold of some of the recent issues of The Sun. Unless it looks totally worthless, I'll let my offer stand. And don't think that my arrogance is unintentional: it's just that I'd rather offend you now than after I started working for you.The enclosed clippings should give you a rough idea of who I am. It's a year old, however, and I've changed a bit since it was written. I've taken some writing courses from Columbia in my spare time, learned a hell of a lot about the newspaper business, and developed a healthy contempt for journalism as a profession.As far as I'm concerned, it's a damned shame that a field as potentially dynamic and vital as journalism should be overrun with dullards, bums, and hacks, hag-ridden with myopia, apathy, and complacence, and generally stuck in a bog of stagnant mediocrity. If this is what you're trying to get The Sun away from, then I think I'd like to work for you.Most of my experience has been in sports writing, but I can write everything from warmongering propaganda to learned book reviews.I can work 25 hours a day if necessary, live on any reasonable salary, and don't give a black damn for job security, office politics, or adverse public relations.I would rather be on the dole than work for a paper I was ashamed of.Sincerely, Hunter S. Thompson

Listening to Janet Yellen splitting hairs and blathering in circles about the state of the economy yesterday was enough to put you in mind of a paint-by-the-numbers robot built in the labs at MIT and programed by its Keynesian economics department. After all, the latter has also inflicted on the world Paul Samuelson, Stanley Fischer, and his infamous student, Ben Bernanke.

So why not a four-fer?

There is only one question that Yellen needs to answer and then all else is readily explained. To wit, does she actually believe that the money market rate——as formerly measured by Fed funds before Bernanke nationalized the interbank market in September 2008——is a wholly owned property of the FOMC?

Or does the overnight rate possibly have some measure of significance as a “price” in the financial system? And one that, in fact, is linked to the rest of the so-called yield curve, and from there to converts, equities, options/derivatives and the whole of the price discovery process in the money and capital markets.

Less than a decade ago almost every financially literate person knew the Fed funds rate—-even if increasingly massaged by the FOMC—- was a financial price and that it transmitted market signals throughout the financial system. So consider the implications of the Fed’s decision to keep it pinned to the zero bound for what will soon be 96 months running.

In a word, Yellen and her posse of Keynesian monetary central planners are apparently willing to drastically falsify the price of money and all that derives from it—-such as the bond market carry trades and the massive churning in the options pits—-on a virtually permanent basis.

And for what purported macroeconomic gains?

In a word, to achieve hairline increases in the inflation rate, when there is already too much inflation; and to nudge unspecified reductions in the US labor market’s “slack”, when the latter is almost surely beyond the reach of monetary policy in any event.

Stated differently, Yellen proved again yesterday—-and painfully so if you were watching her presser—that she is so robotically focussed on achieving fractional decimal point gains on the Fed’s so-called Humphrey-Hawkins “mandates” that she can’t see the forest for the trees.